1)   A wave of optimism boosts household consumption. If the Fed were to engage in stabilization (DASK) policy, the Fed should

  1. increase the money supply and increase interest rate targets
  2. increase the money supply and decrease interest rate targets
  3. decrease the money supply and increase interest rate targets
  4. decrease the money supply and decrease interest rate targets
  5. do nothing

2)   Continuing with the previous question, if policy makers were to use fiscal policy to actively stabilize (a DASK policy) the economy, then policy makers should

  1. raise taxes, increase spending, and reduce the deficit
  2. lower taxes, increase spending, and reduce the deficit
  3. raise taxes, decrease spending, and increase the deficit
  4. lower taxes, increase spending, and increase the deficit
  5. raise taxes, decrease spending, and reduce the deficit

3)   Foreigners decrease their tastes for domestically produced goods and net exports fall. If the Fed were to engage in stabilization (DASK) policy, the Fed should

  1. increase the money supply and increase interest rate targets
  2. increase the money supply and decrease interest rate targets
  3. decrease the money supply and increase interest rate targets
  4. decrease the money supply and decrease interest rate targets
  5. do nothing

4)   Continuing with the previous question, if policy makers were to use fiscal policy to actively stabilize (a DASK policy) the economy, then policy makers should

  1. raise taxes, increase spending, and reduce the deficit
  2. lower taxes, increase spending, and reduce the deficit
  3. raise taxes, decrease spending, and increase the deficit
  4. lower taxes, increase spending, and increase the deficit
  5. raise taxes, decrease spending, and reduce the deficit

5)   Investor sentiments drop as entrepreneurs become pessimistic about the future economy. If the Fed were to engage in stabilization (DASK) policy, the Fed should

  1. increase the money supply and increase interest rate targets
  2. increase the money supply and decrease interest rate targets
  3. decrease the money supply and increase interest rate targets
  4. decrease the money supply and decrease interest rate targets
  5. do nothing

6)   Continuing with the previous question, if policy makers were to use fiscal policy to actively stabilize (a DASK policy) the economy, then policy makers should

  1. raise taxes, increase spending, and reduce the deficit
  2. lower taxes, increase spending, and reduce the deficit
  3. raise taxes, decrease spending, and increase the deficit
  4. lower taxes, increase spending, and increase the deficit
  5. raise taxes, decrease spending, and reduce the deficit

7)   Investor sentiments drop as entrepreneurs become pessimistic about the future economy. If the government were to follow a laissez faire policy, it would

  1. increase the money supply and increase interest rate targets
  2. increase the money supply and decrease interest rate targets
  3. decrease the money supply and increase interest rate targets
  4. decrease the money supply and decrease interest rate targets
  5. do nothing